The latter cannot have been easy for Paulson, who used to lecture the Chinese thusly: "healthy capital markets are absolutely critical to any nation's long-term economic success" (on the eve of his September 2006 inaugural meeting).

Now, of course, China's continued investments in the very unhealthy US capital markets are key to US economic survival. How far things have come. But Paulson learned this week that the Chinese appetite for its piece of the US pie is not insatiable. This, from the Wall Street Journal:

The head of China's sovereign wealth fund says he's lost the confidence
to invest in U.S. banks, while China's central bank governor Zhou
Xiaochuan didn't even stay in town. Instead, he flew to an
international meeting chaired by Mr. Paulson's intended successor,
Timothy Geithner.

Paulson shouldn't feel so bad: it's the same attitude that has people tuning out when his boss steps to the podium to "announce" that the US economy is in recession. Thanks for telling us, now that it's up to your replacement to deal with it.

Back to the Chinese. This was their week to show who is calling the shots. Jean-Vincent Brisset, director of research at the Paris think tank IRIS (Institut de relations internationales et stratégiques) shared with Le Monde his thoughts on why China consistently overreacts to French initiatives (my translation)

The Dalai Lama issue is just a pretext. China is punishing France, but in reality what it doesn't like is European unity. You hit the weakest link... just like in my Army company, when they used to say "you always pick on the same one, so that only one person complains."

China has had a bone to pick with France since 1989, Brisset explains, when France convinced the EU to impose an arms embargo after the Tiananmen Square massacre. Brisset concludes that China sees French attempts at reconciliation as a sign of weakness, the way a "vassal" state would act under the old Chinese empire.

Whether France is a Chinese vassal state may be debatable, but there is no question that China has its acolytes in the West, including a number in Washington. The always reliable Ken Silverstein, writing in the August Harper's Magazine ("The Mandarins: American foreign policy, brought to you by China"), catalogues the bipartisan China "expert" lobby's ways of hiding its business connections to the PRC.

Stonebridge [International, an advisory firm] might best be seen as a sort of one-stop shop for international fixers - a collection of former government officials who replicate, in privatized and miniaturized form, the official foreign-policy apparatus. Both the clients and the former officials benefit immensely from the exchange: for the latter, Stonebridge serves as a holding pen in which to draw a prodigious salary while awaiting a return to the State Department, say, or the Commerce Department, or the National Security Council. Stonebridge's cofounder is Sandy Berger, who before joining the Clinton Administration (in which he became the top national-security adviser) coordinated business lobbying for China at the law firm of Hogan & Hartson. He was perhaps the foremost architect of the administration's dramatic shift in China policy; which moved in short order from solidarity with the spirit of Tiananmen Square to the promotion of trade above all else.

Silverstein shows how China's "visa blacklist" shuts out the rare critical academic or consultant: the price of access to China is acquiescence to its mixed record on everything from human rights to environmental standards. In the revolving door between government service and the private sector, individuals knowledgeable on China know which red lines not to cross.

A close friend with years of experience negotiating with Chinese once told me that an old trick was to get the visiting foreigner drunk, the better to embarrass themselves in front of their Chinese hosts. It tends to put them at a disadvantage in the next day's bargaining.

(Chinese character "foreigner," About.com)

Right now the West - be it Henry Paulson looking for more Chinese investment, or Nicolas Sarkozy finally acceding to meeting with the Dalai Lama, well after the Beijing Olympics - is that drunken, stumbling foreigner, searching for the proper posture of submission before the potentates of Peking (sorry, but I am tempted by alliteration).

Helena Cobban, in Just World News, captures the historic nature of the turnaround in her post "Paulson fails to melt Chinese hearts: "This is a huge, truly world-defining story." But why is the West in this perilous position? Here, you just need to remember what Charles Dickens' Mr. Micawber said in David Copperfield:

Until and unless the US (especially) and the rest of the West get off their China habit of cheap goods and bountiful (but with a price) sovereign capital funding, we will be at their mercy when we come hat in hand. And as Paulson just saw this week, they might just start acting like Mr. Scrooge.

The latter cannot have been easy for Paulson, who used to lecture the Chinese thusly: "healthy capital markets are absolutely critical to any nation's long-term economic success" (on the eve of his September 2006 inaugural meeting).

Now, of course, China's continued investments in the very unhealthy US capital markets are key to US economic survival. How far things have come. But Paulson learned this week that the Chinese appetite for its piece of the US pie is not insatiable. This, from the Wall Street Journal:

The head of China's sovereign wealth fund says he's lost the confidence
to invest in U.S. banks, while China's central bank governor Zhou
Xiaochuan didn't even stay in town. Instead, he flew to an
international meeting chaired by Mr. Paulson's intended successor,
Timothy Geithner.

Paulson shouldn't feel so bad: it's the same attitude that has people tuning out when his boss steps to the podium to "announce" that the US economy is in recession. Thanks for telling us, now that it's up to your replacement to deal with it.

Back to the Chinese. This was their week to show who is calling the shots. Jean-Vincent Brisset, director of research at the Paris think tank IRIS (Institut de relations internationales et stratégiques) shared with Le Monde his thoughts on why China consistently overreacts to French initiatives (my translation)

The Dalai Lama issue is just a pretext. China is punishing France, but in reality what it doesn't like is European unity. You hit the weakest link... just like in my Army company, when they used to say "you always pick on the same one, so that only one person complains."

China has had a bone to pick with France since 1989, Brisset explains, when France convinced the EU to impose an arms embargo after the Tiananmen Square massacre. Brisset concludes that China sees French attempts at reconciliation as a sign of weakness, the way a "vassal" state would act under the old Chinese empire.

Whether France is a Chinese vassal state may be debatable, but there is no question that China has its acolytes in the West, including a number in Washington. The always reliable Ken Silverstein, writing in the August Harper's Magazine ("The Mandarins: American foreign policy, brought to you by China"), catalogues the bipartisan China "expert" lobby's ways of hiding its business connections to the PRC.

Stonebridge [International, an advisory firm] might best be seen as a sort of one-stop shop for international fixers - a collection of former government officials who replicate, in privatized and miniaturized form, the official foreign-policy apparatus. Both the clients and the former officials benefit immensely from the exchange: for the latter, Stonebridge serves as a holding pen in which to draw a prodigious salary while awaiting a return to the State Department, say, or the Commerce Department, or the National Security Council. Stonebridge's cofounder is Sandy Berger, who before joining the Clinton Administration (in which he became the top national-security adviser) coordinated business lobbying for China at the law firm of Hogan & Hartson. He was perhaps the foremost architect of the administration's dramatic shift in China policy; which moved in short order from solidarity with the spirit of Tiananmen Square to the promotion of trade above all else.

Silverstein shows how China's "visa blacklist" shuts out the rare critical academic or consultant: the price of access to China is acquiescence to its mixed record on everything from human rights to environmental standards. In the revolving door between government service and the private sector, individuals knowledgeable on China know which red lines not to cross.

A close friend with years of experience negotiating with Chinese once told me that an old trick was to get the visiting foreigner drunk, the better to embarrass themselves in front of their Chinese hosts. It tends to put them at a disadvantage in the next day's bargaining.

(Chinese character "foreigner," About.com)

Right now the West - be it Henry Paulson looking for more Chinese investment, or Nicolas Sarkozy finally acceding to meeting with the Dalai Lama, well after the Beijing Olympics - is that drunken, stumbling foreigner, searching for the proper posture of submission before the potentates of Peking (sorry, but I am tempted by alliteration).

Helena Cobban, in Just World News, captures the historic nature of the turnaround in her post "Paulson fails to melt Chinese hearts: "This is a huge, truly world-defining story." But why is the West in this perilous position? Here, you just need to remember what Charles Dickens' Mr. Micawber said in David Copperfield:

Until and unless the US (especially) and the rest of the West get off their China habit of cheap goods and bountiful (but with a price) sovereign capital funding, we will be at their mercy when we come hat in hand. And as Paulson just saw this week, they might just start acting like Mr. Scrooge.